Mar­ket set for greater role in oil and gas sec­tor

China Daily European Weekly - - BUSINESS - By ZHENG XIN zhengxin@chi­nadaily.com.cn

The mar­ket-ori­ented re­form of the coun­try’s oil and gas sec­tor will give the mar­ket a de­ci­sive role in the in­dus­try, al­low­ing broader par­tic­i­pa­tion in a sec­tor dom­i­nated by State-owned com­pa­nies, an­a­lysts say.

“The blue­print for the heav­ily mo­nop­o­lized en­ergy sec­tor won’t have any se­ri­ous im­pact on the dom­i­nance of the State-owned trio of giants in the sec­tor, but it will def­i­nitely en­cour­age the en­try of in­de­pen­dent com­pa­nies into the in­dus­try and di­ver­sify the mar­ket play­ers,” says Wang Lu, an Asia-Pa­cific oil and gas an­a­lyst at Bloomberg In­tel­li­gence.

China’s oil and gas sec­tor is dom­i­nated by three heavy­weights: China Na­tional Petroleum Corp, China Petro­chem­i­cal Corp and China Na­tional Off­shore Oil Corp, which have long been ac­cused of mo­nop­o­liz­ing the na­tion’s oil and gas re­sources.

“Al­low­ing new play­ers into the in­dus­try may raise the coun­try’s up­stream cap­i­tal ex­pen­di­ture, which would in­crease the work­load of oil­field ser­vice com­pa­nies, es­pe­cially in­de­pen­dent ones such as An­ton Oil­field Ser­vices Group and SPT En­ergy Group,” saysWang.

The news of the re­form plan fu­eled a stock mar­ket up­surge among oil­field ser­vice com­pa­nies on May 22, with Sinopec Oil­field Ser­vice Corp climb­ing by 9.95 per­cent to 4.09 yuan (60 cents; 0.53 eu­ros; £0.46) and China Oil­field Ser­vice ris­ing by 0.83 per­cent to 13.31 yuan.

Low oil prices have made PetroChina, Sinopec and CNOOC more pru­dent in cap­i­tal ex­pen­di­ture, says Wang.

The re­form plan, re­leased on May 21, in­cluded open­ing up ex­plo­ration to more com­pa­nies, lib­er­al­iz­ing re­tail prices and sep­a­rat­ing pipe­line op­er­a­tions from the coun­try’s ma­jor en­ergy com­pa­nies.

Dong Xi­ucheng, a pro­fes­sor at China Uni­ver­sity of Petroleum in Bei­jing, says the re­form will give com­pet­i­tive com­pa­nies eas­ier mar­ket ac­cess, whether they are Sta­te­owned or pri­vate.

“A more di­ver­si­fied com­pet­i­tive mar­ket will be the fu­ture trend,” says Dong.

“While the gov­ern­ment should safe­guard na­tional en­ergy se­cu­rity, the mar­ket should play its role in al­lo­cat­ing re­sources, boost­ing pro­duc­tiv­ity to meet de­mand.” How­ever, one an­a­lyst says the plan lacks an im­ple­men­ta­tion sched­ule, dead­line or spe­cific projects.

“The plan shows a clear at­ti­tude to­ward the sec­tor’s fu­ture di­rec­tion,” says Li Li, en­ergy re­search direc­tor at ICIS China, an en­ergy mar­ket con­sult­ing com­pany.

“How­ever, the blue­print comes up with no spe­cific sched­ule for the long-awaited re­form of the sprawl­ing State-con­trolled sec­tor, or clear dead­lines or cer­tain re­quire­ments for any spe­cific projects and com­pa­nies.”

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